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Institutional Ownership Data: Quantitative Research Note
23 November 2020
Research Signals - October 2020
Introduction and methodology
In this research note, IHS Markit's internal quantitative
research group, Research Signals, reports our initial research
using the IHS Markit institutional ownership point-in-time dataset.
Using the company holdings data, we construct 17 factors built from
holdings and trading activity. Factors introduced evaluate
ownership concentration, changes in holdings, institutional and
hedge fund holdings and liquidity flow ratios globally across
developed and emerging markets.
To test factor efficacy, we calculate simulated long-short
decile portfolio returns using the following method. First,
percentile ranks for each factor are computed across each universe
by sorting according to the underlying factor interpretation. We
begin with the percentile ranks at the beginning of each month and
divide the universe into ten deciles, with the top ranked, or
buy-rated, names assigned to decile 1 (D1) and the bottom ranked,
or sell-rated, names in decile 10 (D10). At the end of each month,
we then compute the equal-weighted decile return using USD total
returns and report the return spread between D1 and D10, simulating
a long-short portfolio. Note that we use quintiles rather than
deciles for emerging markets due to smaller universe sizes.
Factors are backtested over the Research Signals standard
universes. The US Total Cap universe represents 98% of the
cumulative market cap, or approximately 3,000 names, while the
developed and emerging markets universes represent 95% of
cumulative market cap for each member country subject to minimum
market caps of USD 250 million and 100 million, respectively.
Average monthly decile return spreads are reported for the full
backtest period from February 2016 through June 2020. We highlight
the monthly time series of cumulative spreads (interpreted as the
growth of a dollar) for key factors regionally, with the full
results for each factor across each universe summarized in the
table at the end of this report, followed by the factor
definitions.
Results
For the US Total Cap universe, the top performing factors
include Change in Active Shares, Hedge
Fund Count and Top 5 Ownership
Concentration, with the latter two also capping
performance in Developed Pacific, along with Liquidity Flow
(Count). The highest average monthly spreads in Developed
Europe were turned in by % Buyins out of Bought
(Count), Buyin-Selloff Imbalance (Count)
and Average % Change in Ownership.
The following six figures show the best performing factors in
each market segment tracking the growth of $1 over the backtest
time period. Table 1 is a matrix showing all factors performance,
followed by a description of all the factors used. Additional
results and details are available upon request.
Factor List
Top 5 Ownership Concentration - Sum of top 5
institutional holdings of a stock as a ratio of total institutional
holdings, sorted in ascending order
Top 10 Ownership Concentration - Sum of top 10
institutional holdings of a stock as a ratio of total institutional
holdings, sorted in ascending order
Change in Active Share Holdings - 3-month
change in active shares as a percent of total institutional
holdings, sorted in descending order
Average % Change in Ownership - Average change
in institutional holdings of a stock relative to the prior 3-month
institutional holdings, sorted in descending order
% Institutional Holdings - Total institutional
holdings of a stock as a percent of total shares outstanding,
sorted in descending order
Bought Sold Imbalance (Shares) - Total shares
bought by institutions less sold relative to the total shares
bought and sold by institutions, sorted in descending order
Bought Sold Imbalance (Count) - Number of
institutions buying a stock less selling relative to the total
number of institutions buying and selling the stock, sorted in
descending order
Buyin Selloff Imbalance (Shares) - Total shares
of newly opened positions by institutions less shares of closed
positions relative to the total number of buyin and selloff shares
by institutions, sorted in descending order
Buyin Selloff Imbalance (Count) - Number of
institutions with newly opened positions less closed positions
relative to the total number of buyins and selloffs, sorted in
descending order
% Buyins out of Bought (Shares) - Total shares
of newly opened positions by institutions as a percent of total
shares bought by institutions, sorted in descending order
% Buyins out of Bought (Count) - Number of
institutions with newly opened positions as a percent of number of
institutions buying, sorted in descending order
% Selloffs out of Sold (Shares) - Total shares
of closed positions by institutions as a percent of total shares
sold by institutions, sorted in ascending order
% Selloffs out of Sold (Count) - Number of
institutions with closed positions as a percent of number of
institutions selling, sorted in ascending order
% Hedge Fund Holdings (Count) - Number of hedge
fund investors in a stock as a percent of total number of
institutional investors, sorted in descending order
% Hedge Fund Holdings (Shares) - Total shares
held in hedge funds as a percent of total institutional holdings,
sorted in descending order
Liquidity Flow (Shares) - Total shares held by
active institutions as a ratio of total institutional holdings,
sorted in descending order
Liquidity Flow (Count) - Number of active
institutional investors in a stock as a ratio of total number of
institutional investors in the stock, sorted in descending
order
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Factor List
